Nationals Accounting Practice Flashcards
The posting Refernence column of a journal is used to…
record the number of the ledger account to which the information is posted.
Which of the following types of accounts normally have debit balances? a- expenses and assets. b- assets and revenue. c- assets, liabilities, and owner’s equity. d- liabilities and owner’s equity
A
The journal entry to record the purchase of equipment for a $100 cash down payment and a balance of $400 due in 30 days would include…
a debit to Equipment for $500, a credit to Cash for $100, and a credit to Accounts Payable for $400.
On the worksheet, the Balance Sheet columns should balance
After the net income amount is added to the Balance Sheet Credit column
On a worksheet, the adjusted balance of a contra asset account would be extended to
The Balance Sheet Credit column
The journal entry to record the withdrawal of cash by Sue Snow, the owner, to pay a personal utility bill would include
A debit to Sue Snow, Drawing and a credit to Cash
When revenue is earned from charge-account sales, the accountant
Debits Accounts Receivable and credits a revenue account.
Credits are used to record
Increases in liabilities and owner’s equity.
A firm purchased telephone equipment for cash. By mistake, the person who recorded the transaction debited Utilities Expense instead of Office Equipment. The error was discovered after the data posted. The correcting entry should contain
A debit to Office Equipment and a credit to Utilities Expense.
On a balance sheet, Accumulated Depreciation—Equipment is reported
As a deduction from the cost of the equipment.
The balance sheet shows
The financial position of a business at a given time.
The financial statement that is prepared first is
The income statement.
On a worksheet, a net loss is
Recorded in the Balance Sheet Debit column
The entry to transfer a net loss to the owner’s capital account would include
A debit to the owner’s capital account and a credit to Income Summary.
The income statement shows
The results of operations for a period of time
The owner’s drawing account is closed by
Debiting the owner’s capital account and crediting the owner’s drawing account
The corporations whose stock can be bought and sold on stock exchanges and in over-the-counter markets are referred to as
Publicly owned corporations
When charge customers pay cash to apply against their accounts, the amount is recorded
On the left side of the Cash account and the right side of the Accounts Receivable account.
The asset, liability, and owner’s capital accounts appear on all of the following except… a- the postclosing trail balance. b- The income statement. c- The worksheet. d- The balance sheet.
B
After the closing entries are posted to the ledger, each expense account will have
A zero balance
When the owner withdraws cash for personal use,
Assets decrease and owner’s equity decreases.
If the income statement covered a six-month period ending on November 30, 20–, the third line of the income statement heading would read
Six-month Period Ended November 30, 20—
If long-term assets are not adjusted, expenses on the income statement
Will be understated
When an entry is made in the general journal,
Accounts to be debited should be listed first.
The entry to close the Income Summary account may include
A debit to Income Summary and a credit to the owner’s capital account
One purpose of closing entries is to give zero balances to
Revenue and expense accounts
The general ledger accounts are usually arranged in the following order:
First the balance sheet accounts, then the income statement accounts.
The revenue account Fees Income is closed by
Debiting Fees Income and crediting Income Summary.
An example of an economic entity is… a- a church. b- A town. c- A business. d- A nonprofit hospital.
C
Equipment cost $36,000 and is expected to be useful for 5 years and have no salvage value. Under the straight-line method, monthly depreciation will be…
$600
When the owner writes a check to pay the firm’s electric bill,
Assets decrease and expenses increase
All financial statements submitted to the SEC by publicly owned corporations must include an auditor’s report prepared by
An independent certified public accountant
After the data about transactions have been posted, the next step in the accounting cycle is to…
Prepare the worksheet.
The total of the figures on the left side of a Cash account is $25,800. The total of the figures on the right side is $14,100. The balance of this account is
$11,700 and would be recorded on the left side of the account.
All of the following accounts will appear on the postclosing trial balance except… a- Equipment. b- Depreciation Expense—Equipment. c- Accumulated Depreciation—Equipment. d- Accounts Payable
B
If assets are numbered from 100-199, which of the following accounts would not be given a number in the 100 series? a- supplies. b- Accounts Payable. c- Prepaid Rent. d- Accounts Receivable.
B
The adjustments made to the worksheet are
Recorded in the journal and then posted to the general ledger accounts.
Assets and liabilities are reported on
The balance sheet
If the prepaid expenses are not adjusted, assets on the balance sheet
Will be overstated
The Cash account has a $15,000 debit balance. A $5,000 credit entry and a $7,000 debit entry are posted to the account. The final balance of the Cash account is
A $17,000 debit balance
On November 25, 2004, the company paid $24,000 rent in advance for a six-month period (December 2004 through May 2005). On December 31, 2004, the adjustment for expired rent would include
A $4,000 credit to Prepaid Rent
When the owner invests cash in a business,
Assets and owner’s equity increase
A postclosing trial balance should include all of the following except…
A Fees Income account
If the trial balance totals are not equal, the error may have been caused by a transposition if the difference is divisible by…
9
When the trial balance totals are not equal, the error may have been caused by recording a debit as a credit if the difference is divisible by…
2
Owners are not personally responsible for the debts of the business if the form of business organization is…
The corporation
The book value of long-term assets is reported on…
The Balance Sheet
The government agency that has final authority over the financial reporting of publicly owned corporations is the…
SEC
The rent paid for future months is a(n) ____ account
Asset
The area of accounting that involves the preparation of internal reports for a firm’s executives and the analysis of the data in these reports to aid in decision-making is known as…
Managerial accounting
After the worksheet has been completed, the next step in the accounting cycle is to…
Prepare the financial statements
When equipment is purchased for cash,
One asset increases and another asset decreases.
The Accounts Payable account has a $3,000 credit balance. An entry for the payment of $1,000 on the amount owed is recorded and posted. The new balance of the Accounts Payable account is…
A $2,000 credit balance.
Which of the following accounts is not closed? a- Joan Wilson, Drawing. b- Rent Expense. c- Fees Income. d- Cash
D
The Financial Accounting Standards Board is responsible for…
Developing generally accepted accounting principles.
The journal entry to record the payment of salaries should include
A debit to Salaries Expense and a credit to Cash
Which of the following increase owner’s equity? A-expenses. B- Revenue. C- Withdrawals. D- Receiving cash from customers.
B
One purpose of closing entries is to…
Transfer the results of operations to owner’s equity.
A net loss results
When expenses are greater than revenue
Debits are used to record increases in
Assets and expenses
If liabilities are $4,000 and owner’s equity is $15,000, assets are
$19,000
The net income or net loss from the income statement is transferred to the
Statement of owner’s equity
Which of the following accounts will not normally have a zero balance after the closing entries have been posted?
The owner’s capital account
When an entry is made in the general journal,
The accounts to be credited should be indented
Which of the following need not be completed separately if a worksheet is prepared? A-an income statement. B- A balance sheet. C- A statement of owner’s equity. D- A trial balance
D
The account used to record increases in owner’s equity from the sale of goods or services is
The revenue account.
The journal entry to record the sale of services on credit should include
A debit to Accounts Receivable and a credit to Fees Income
Which of the following groups contain only accounts that normally have credit balances? A- Salaries Expense and Accounts Payable. B- Accounts Receivable and Fees Income. C- Accounts Payable and Equipment. D- Fees Income and John Smith, Capital
D
On a worksheet, the adjusted balance of the Prepaid Rent account is extended to
The Balance Sheet Debit column
On a worksheet, the adjusted balance of the revenue account Fees Income would be extended to
The Income Statement Credit column
The account numbers are recorded in the Posting Reference column of the general journal
After each amount is posted.
Which of the following accounts is a permanent account? A- Fees Income. B- Owner’s drawing. C- Supplies Expense. D- Supplies.
D
A firm paid cash to apply against a debt. To record this transaction, the accountant would
Debit Accounts Payable and credit Cash
On a worksheet, the adjusting entry to account for depreciation of equipment consists of
A debit to Depreciation Expense and a credit to Accumulated Depreciation
When equipment is purchased on credit,
Assets and liabilities increase
Amounts that a business must pay in the future are known as
Accounts payable
Debits are used to record
Increases in assets
The group of accounting educators who offer their opinions about proposed FASB statements, after research has been done to determine the possible effects on financial reporting and the economy, is
The AAA
Which of the following accounts is not a permanent account? A- Accounts Payable. B- Salaries Expense. C- Cash. D- Thomas Bernard, Capital
B
The financial affairs of a business and the financial affairs of the owners should be…
Kept totally separate
If a journal entry that contains an error has already been posted,
A correcting entry should be journalized and posted
The journal entry to record the payment of a monthly utility bill would include
A debit to Utilities Expense and a credit to Cash
When a trial balance is in balance,
The debit account balances equal the credit account balances
The form of a business organization that is not affected by the withdrawal or death of an owner and can continue forever is…
The corporation
If a transaction is properly analyzed and recorded,
The total amount debited will equal the total amount credited
Examples of assets are… A- Cash and accounts receivable. B- Cash and revenue. C- Investments by the owner and revenue. D- Cash and rent expense.
A
If at the end of the year the firm owes a balance for workers’ compensation insurance, the adjusting entry includes…
A debit to Workers’ Compensation Insurance Expense
The Purchases account is
A temporary account
Employees’ payments for federal income taxes withheld and social security and Medicare taxes are periodically
Deposited in a government-authorized financial institution.
Most states require that the employer file the state return for unemployment taxes
Quarterly
Form 941 is filed
Quarterly
To record the payment of a purchase invoice when a cash discount is taken, the accountant would
Debit Accounts Payable, credit Purchases Discounts, and credit Cash
When the sales department needs goods, it sends the purchasing department a form called
A purchase requisition
If a firm had sales of $50,000 during a period and sales returns and allowances of $4,000, its net sales were…
$46,000
The amount used by wholesalers to record sales in its sales journal is…
The net price
Assuming a Medicare tax rate of 1.45% and monthly gross wages of $2,500, the entry to record in Medicare Tax Payable for one quarter is
A credit for $108.75
To arrive at an accurate balance on a bank reconciliation statement, outstanding checks should be
Deducted from the bank statement balance
The entry to record a purchase of merchandise on credit includes
A debit to Purchases and a credit to Accounts Payable
To find the balance due from an individual customer, the accountant would refer to…
The accounts receivable subsidiary ledger
On a bank reconciliation statement, you would find all of the following except
A list of canceled checks
Allowance for Doubtful Accounts is reported in
The Assets section of the balance sheet
Which of the following would not be shown as an adjustment to the book balance on a bank reconciliation statement? A- Deposits in transit. B- Bank service charges. C- A charge for printing new checks. D- NSF checks.
A
In a firm that uses special journals, credit sales of merchandise are recorded in…
The Sales Journal
Accrued income is income that has been
Earned but not received
With the accrual basis of accounting, it is appropriate to recognize revenue from a credit sale when?
On the date of the sale
The amount of the purchases for a period is presented in
The Cost of Goods Sold section of the income statement
If a check written by a firm is not canceled by the bank and returned with the month’s bank statement, the firm should
Consider this check as outstanding when preparing the bank reconciliation
An adjusting entry is usually not required for an expense item when…
It is paid for, recorded, and used in one period
Employers usually record unemployment taxes
At the end of each payroll
On November 1, 20–, a firm accepted a 4-month, 10 percent note for $900 from a customer with an overdue balance. The accrued interest recorded for this note for the year ended December 31, 20–, is
$15
Publication 15, Circular E contains withholding information
For federal income taxes only
It is best not to pay wages and salaries by
Cash
The total of the balances in the creditor’s accounts should agree with the balance of
The Accounts Payable account in the general ledger
Which of the following taxes is not withheld from an employee’s pay?
FUTA tax
On Form 941, the Employer’s Quarterly Federal Tax Return, a firm calculates its liability for the quarter for…
Federal income taxes withheld and social security and Medicare taxes
Purchases of merchandise are
Debited to Purchases
A copy of the Form W-2 for each employee is submitted to the Social Security Administration along with…
Form W-3
All details related to an employee’s earnings, deductions, and net pay throughout the year would be found in…
The individual earnings record
Lisa Ramos has a regular hourly rate of $10.75. In a week when she worked 40 hours and had deductions of $55 for federal income tax, $26.75 for social security tax, and $6.25 for Medicare tax, her net pay was
$342
The column totals in a payroll register
Are used in the journal entry to record the payroll
Included with its bank statement a firm may receive a credit memorandum, which could indicate
An addition to the firm’s account balance because the bank collected the amount due on a promissory note from a customer of the firm.
In a firm that uses special journals, cash collected from all sources is
Recorded in the cash receipts journal
On January 2, 20–, a firm purchased equipment for $8,500. Depreciation expense for 20–, given the straight-line method, a 5-year useful life, and a salvage value of $1,500, is
$1,400
Which of the following groups of accounts will have zero balances after the closing process is completed? A- Depreciation Expense and Accumulated Depreciation—Equipment. B- Purchases and Purchases Returns and Allowances. C- Allowance for Doubtful Accounts and Uncollectible Accounts Expense. D- Merchandise Inventory and Sales
B
A cash sale of merchandise would be recorded in
The cash receipts journal
Which of the following is a factor in the determination of the amount of social security tax to withhold from an employee’s pay? A- Withholding allowances claimed on Form W-4. B- Hours worked during the pay period. C- Marital status. D- Gross wages
D
The current ratio is calculated by
Dividing current assets by current liabilities
If an account has a debit balance of $700 in the Trial Balance section of a worksheet and there is a credit entry of $200 in the Adjustments section, the account balance in the Adjusted Trial Balance section of the worksheet is…
A $500 debit
Credit purchases of supplies that are to be used in the business are entered in
The general journal
The amount debited to Wages Expense when a payroll is recorded is the
Total gross earnings
In a sales journal used to record taxable sales, the total of the Accounts Receivable column should equal
The sum of the totals of the Sales Tax Payable column and the Sales column
Allowance for Doubtful Accounts is
Subtracted from Accounts Receivable in the Assets section of the Balance sheet
The Sales Returns and Allowances account is classified as
A contra revenue account
A firm appropriately wrote a check for $78 but entered the amount as payment of $87. On a bank reconciliation statement this error would be shown as…
An addition of $9 to the book balance
A creditor’s account in the accounts payable ledger has a $1,600 beginning balance. After a transaction for $700 is posted from the purchases journal, the balance of the creditor’s account is
$2,300 credit
The entry to record a return by a credit customer of defective merchandise on which no sales tax was charged includes
A debit to Sales Returns and Allowances and a credit to Accounts Receivable
The entry to record the payment of SUTA tax would include
A debit to State Unemployment Tax Payable and a credit to Cash
The ending merchandise inventory is recorded on the worksheet in
The Income Statement Credit and the Balance Sheet Debit columns
Merchandise is sold on credit for $600 plus 5% sales tax. The entry in the sales journal will include a debit to Accounts Receivable for
$630
To record the deposit of FUTA tax, the accountant would
Debit Federal Unemployment Tax Payable and credit Cash
Postings to the accounts payable ledger should be made
Daily
The entry to record an additional cash investment by the owner is recorded in
The cash receipts journal
To record a deposit of federal income taxes withheld and social security and Medicare taxes, the accountant would
Debit one or more liability accounts and credit an asset account
Freight charges on merchandise purchases should be debited to
The Freight In account
The entry to reverse the adjustment for accrued interest income consists of
A debit to Interest Income and a credit to Interest Receivable
The Sales Returns and Allowances account is presented
On the income statement as a deduction from Sales
Salespeople who are paid a percentage of net sales are paid on
The commission basis
The entry to reverse the adjusting entry for accrued payroll taxes expense includes
A debit to Social Security Tax Payable and a debit to Medicare Tax Payable
The entry to replenish a petty cash fund includes
Debits to various expense accounts and a credit to Cash
On the financial statements prepared at the end of an accounting period, the ending merchandise inventory is shown
On both the income statement and the balance sheet
Gross profit on sales is calculated by
Subtracting cost of goods sold from net sales
A wholesale business sells goods with a list price of $900 and a trade discount of 40%. The net price is
$540
The entry in a firm’s accounting records for a credit customer’s check that was returned by the bank marked “NSF” would include
A debit to Accounts Receivable and a credit to Cash
An income statement that lists all revenues in one section and all expenses in another section is known as
A single-step income statement
A firm’s bank reconciliation statement shows a book balance of $15,820, an NSF check of $400, and a service charge of $20. Its adjusted book balance is
$15,400
If a firm does not have a sales returns and allowances journal, the entries for these transactions are made in
The general journal
The base earnings subject to unemployment taxes is
Smaller than the base for social security
The beginning capital balance shown on a statement of owner’s equity is $43,000. Net income for the period is $18,000. The owner withdrew $22,000 cash from the business and made no additional investments during the period. The owner’s capital balance at the end of the period is
$39,000
The balance of the owner’s drawing account is
Used in the calculation of ending capital on a statement of owner’s equity
In the general journal, reversing entries are dated as of
The first day of the new fiscal period
The adjusting entry for uncollectible accounts requires
A debit to Uncollectible Accounts Expense and a credit to Allowances for Doubtful Accounts
An employee whose regular hourly rate is $9 and whose overtime rate is 1.5 times the regular rate worked 44 hours one week. The employee’s gross pay was
$414
Prepaid expenses appear in
The Current Assets section of the balance sheet
A retailer recorded the following in June: cash sales $2,000; credit sales, $9,000; sales returns and allowances, $1,000. Assuming the sales tax rate is 7%, the entry to record the sales tax payment includes a debit to Sales Tax Payable for
$700
Each employee of a firm will receive several copies of Form W-2, the Wage and Tax Statement,
From the employer once a year
Check marks next to the individual amounts in the purchases journal mean that the amounts
Have been posted to the accounts payable subsidiary ledger
Which of the following accounts will appear on the postclosing trial balance?
Medicare Tax Payable
A reversing entry should not be made for
An adjusting entry to record depreciation
After a bank reconciliation statement is completed, a firm may have to make an entry in its accounting records for
NSF checks
After all postings have been made, the total of the schedule of accounts receivable should equal
The balance of the Accounts Receivable account in the general ledger
The net income for an accounting period appears on the worksheet in
The Income Statement Debit and the Balance Sheet Credit columns
Each type of deduction made from the employees’ earnings is recorded in a separate
Liability account
Purchases of merchandise on credit should be recorded in
The purchases journal
A firm that sells goods that it purchases for re-sale is a
Merchandising business
Which of the following accounts is not closed? A- Purchases. B- Rent Expense. C- Merchandise Inventory. D- Sales
C
To record a return of merchandise purchased on credit, the accountant would
Debit Accounts Payable and credit Purchases Returns and Allowances
A firm had purchases of $16,200, freight charges of $300, and purchases returns and allowances of $1,100 during one month. Its net delivered cost of purchases was
$15,400
An employee whose regular hourly rate is $10 and whose overtime rate is 1.5 times the regular rate worked 44 hours in one week. In the payroll register, the employer should record an overtime premium of
$20
The adjusting entry to record accrued interest on a note payable requires
A debit to Interest Expense and a credit to Interest Payable
Upon collection of the amount due on an interest-bearing promissory note from a customer, the accountant would debit Cash, credit Notes Receivable, and
Credit Interest Income
Which of the following is not a current asset? A-Equipment. B- Merchandise Inventory. C- Prepaid Insurance. D- Accounts Receivable
A
When checks are issued to employees after the entry to record the payroll has been made, the accountant would
Debit Salaries and Wages Payable and credit Cash
Federal law requires that the employer withhold from the employee’s pay
Federal income tax, social security tax, and Medicare tax
Inventory turnover is calculated by
Dividing the cost of goods sold by average inventory
